Rich will just pump money into property, shares, if super tax changes

Cutting super tax breaks on the rich won't bring in more revenue if the wealthy are still allowed to use perks on property and shares, submissions to the Abbott government's tax review argue.

Submissions, which are rolling into Treasury as the tax white paper process ramps up, are also calling for lower personal tax rates and reduced company tax rates, but a higher goods and services tax rate and base.

Superannuation industry peak lobby group ASFA says it agrees that people with large balances shouldn't be able to get tax breaks on their super earnings, but argues changes cannot be made in isolation of action on other sacred cow tax breaks like negative gearing.

"For most high net worth individuals, tax arrangements relating to capital gains, negative gearing and the family home are likely to have more impact on the achievement and maintenance of wealth than superannuation tax concessions," it said.

"Therefore, any change in superannuation should also consider whether other changes to the tax system are needed."

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Its submission said individuals should not be allowed to accumulate more than $2.5 million in the pension phase. There is currently no limit.

ASFA argues that amounts under $2.5 million should remain tax-free, but any returns over $2.5 million would be subject to a 15 per cent tax rate.

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Women shouldn't have to retire with less

ASFA's submission also raised concern that individuals contribute significant amounts to superannuation through non-concessional contributions which are capped at $540,000 every three years up until age 65.

"This is inconsistent with the principle of equity, as those with high incomes and wealth have a greater capacity to contribute significant amounts of money post-tax and receive concessional tax treatment on earnings, sometimes for decades," the submission said.

It said the amount of non-concessional contributions should be capped at $1 million per individual per lifetime.

But women who take time off work to have kids should be able to contribute more to their super to stop them from being penalised. The average superannuation balance at the time of retirement in 2011-12 was about $197,000 for men and $105,000 for women. ASFA says one way of dealing with this is to increase the concessional contributions cap from its current amount of $30,000 for under 50s.

"It may be appropriate to rethink this position," the submission said.

"Ideally, the most equitable retirement savings system would tax income in the hands of the individual when it is actually received."

But it also warned the taxation of superannuation cannot be considered in isolation.

"There must first be a long-term vision and objectives for our retirement savings system," the CPA submission said, although the lobby group warns against making changes to negative gearing or fringe benefits tax. The government should instead lower personal tax, and hike up the GST rate to 15 per cent, it said.

Bracket creep needs to stop

Professional services firm Wolters Kluwer raised concern about "bracket creep" – where taxpayers get pushed into higher marginal tax rates as their earnings rise with inflation.

"There is an observable tendency for government to rely on bracket creep to assist with the task of budget management rather than returning excess taxes to taxpayers," its submission said. "Consideration should be given to redressing this by annually indexing the thresholds at which increases in the marginal tax rates for individuals apply."

The firm also refers to recent discussion of perceived ATO favouritism towards the top end of town, based on statistics showing it settles over a billion dollars' worth of cases with large business. It said one way to deal with this was to have mandatory disclosure of the terms of all settled tax disputes.

Tax accountants H&R Block also suggest lowering personal tax rates by indexing the income-tax thresholds. It also wants the government to loosen the rules around the deductibility of self-education expenses, so that taxpayers can claim the costs of career advancement.

The H&R Block submission also points out that recent job cuts at the ATO, and more reliance on taxpayers to self assess, means there may be "more pressure on the taxpayer to bear the burden of compliance". It suggests this will feed into increased demand for tax agent services, not a decrease as some are predicting as a result of pre-filled tax returns.

Accounting firm Grant Thornton think there should be a tax on super withdrawals over $200,000. It also wants the government to stop taxpayers drawing on super to fund private housing, which it says creates "inflationary pressure on house prices and could allow people to extend themselves beyond appropriate levels".

The firm also called for the GST rate to rise from 10 to 15 per cent and a broadening of the base of supplies to which GST is applied. Anything below 15 per cent would not raise enough revenue and would mean Australia would continue to lag behind other OECD nations.

Submissions to the tax white paper have also warned against any changes to Australia's dividend imputation system. ASFA warned that touching the system would increase the tax on superannuation fund members, including low to middle income earners.